If you are a business owner or aspiring entrepreneur, you have probably heard of executive summaries and business plans. But what exactly is an executive summary of a business plan? How do you write one?
When starting a business, one of the first and most important documents you’ll create is your business plan. This document lays out your vision for the company, explains how you’ll achieve your goals, and serves as a roadmap for future growth. While there are many components to a business plan, one of the most important is the executive summary. This section summarizes your entire plan in just a few pages, making it an essential part to grab attention and persuade readers to keep reading.
In this article, we will answer these questions and provide tips on how to create an effective summary that captures the key points of your business plan. So whether you are just starting out or have an existing business, read on for tips on how to write an executive summary that will help you succeed.
What is an Executive Summary?
An executive summary is usually a short section in a document that is meant for business purposes.
The role of the executive summary is to produce a shortened summary of a long report, proposal, or group of reports in order for the reader of the document to be acquainted with the large material without having to read all of it.
Why Is an Effective Business Plan Introduction Important?
The business plan is created for many important purposes, one of which is to attract potential investors for the business.
Most investors do not read past the introduction of the business plan or in other words, the executive summary. This is why it is important to have an effective business plan introduction. It is the hook that needs to keep the reader interested in the business.
Some people may read past the executive summary to the other sections, but that is only if the executive summary interests them. A badly written introduction could be the very reason a business plan may be rejected.
Now that we have seen why an effective business plan introduction is important, let’s look into what information the executive summary should contain.
What Information Goes in an Executive Summary?
While the executive summary does introduce the business to the business plan readers, it is more than just that.
The executive summary is more of a mini business plan than just an introduction. It must contain a brief outline of all the different sections of the business plan in a logical order.
The following is some of the important information to be included in the executive summary of the business plan:
1. Description of the Business Concept
The executive summary must contain a piece of brief information about the business including the name of the business, the founders and owners, the products and services provided by the business, what the business aims to achieve, etc.
2. Business Opportunities
The executive summary must also talk about the opportunities present in the industry and how the business aims to take advantage of them. It must also contain key information that may convince investors to invest in the business such as the trends in the industry, the market size, the demand and supply, growth opportunities, etc.
3. Target Audience
The next part of the executive summary must contain a brief on who the target audience is, and what position the business will hold in the market.
4. Competitive Advantage
In order to get a good investment for the business, the business plan has to convince the investor that the business is something unique and profitable in the market. This can be represented by what product or service the business provides that other competitors do not, and how it can serve as a competitive edge to win customers for the business. It can also include points on how the customers will be benefitted by using the product or service provided by the business.
5. Business Profitability
Businesses are created to gain profits and anybody who wants to invest in a business will only do so if they find that the business has the potential to reap good profits. So the executive summary must also include important points on the expected gross margin, the operating margin, and the profit based on the forecasted sales and costs of the business.
All businesses are run by people and it is the qualification and skills of the people who manage the business that helps grow the business to the next level. Hence the executive summary must also provide a brief on the skills and qualifications of the lead entrepreneurs and all the team members, their age, experience in relevant fields, achievements, etc.
7. Investment And Offerings
The executive summary must also provide details on the amount of equity or debt required as an investment for the business and how the investor will achieve the return on investment through the business.
8. Exit Route
The executive summary must also brief the readers on how you as the business owner plan to withdraw from the business.
Other Topics Your Executive Summary May Need to Cover
In addition to the main aspects of the business that needs to be included in the executive summary, there are other key topics that can boost the executive summary to the next level such as the following:
1. Evidence of Early Success
Existing proofs and achievements act as evidence of the success potential of a business. Including some of the early successes that the business has achieved will enhance the business plan and help investments gain trust in the business.
So, the executive summary must contain an overview of all the successes, achievements, and milestones that the business has managed to achieve so far.
2. Future Milestones
Another important factor that attracts the attention of the readers is what the business promises to achieve in its future endeavors.
Just like past successes, the future goals of the business also act as a way to promise investors what they are to gain if they decide to invest in the business.
The future milestones must not be too unrealistic as they can deter investors rather than gain their approval. The goals must be realistic, attainable, and aligned with the vision of the business.
3. Evidence of Financial Stability
A financially stable business is one that can make enough money through its products and services and can pay for the expenses incurred during the operation of the business and also gain profits. The executive summary must include details on how the entrepreneur aims to secure the business financially. This will further gain the trust of the investor in the business as a profitable entity.
Tips for Writing an Executive Summary for Investors
As mentioned above, the executive summary must be tailored to match the requirements of the reader who reads it and is able to answer questions they may possibly have for the business. The following are some of the tips to be followed while writing an executive summary for investors:
1. Add a Compelling Customer Value Proposition
One of the best ways to attract the attention of an investor is to showcase one of the painful problems that customers face in your industry and how your business will help in creating a solution for that problem. Creating a compelling product or service that will solve a problem that most of the industry is ignorant of is a sure way to drive customers to your business. Pitching this idea in the executive summary will help make the investor interested in your business.
2. Show Market Potential
Investors are looking forward to businesses that have great value in the market. A good product or service with no market opportunity is a big turndown. Collecting external data to prove the market potential of the business is a great way to gain investments.
3. Define Your Business Model Clearly
An investor is someone who is looking for a profit in the business that he is going to invest in. It is important to show what your business model is about in terms of all the important key elements such as the price, margin, sales volume, etc so that the investor will have a better idea about the business before investing in it.
4. Show Team Potential
Investors need proof that a business will succeed with good investments. Hence the executive summary must highlight how your team is perfectly equipped to face challenges in the industry and grow the business to the next level.
Tips for Writing an Executive Summary for a Bank Loan
Writing a business plan and in turn, the executive summary for a bank loan is different from a business plan written for an investor in many ways.
A business plan is written for an investor and usually aims to attract a particular investor for a business or an individual, while one written for a bank loan is to satisfy the needs of the bank to approve a loan.
Hence the executive summary for such a business plan also needs to be different in some ways. Here are a few tips to write a better executive summary for a bank loan:
1. Show Real-Time Data Of Business Operations
Banks require more solid data than investors. The business potential can be determined by a bank only through its past performance. So executive summary must highlight key achievements and financial goals that the business has achieved in the past and show how the business plans to increase it in the future.
2. Highlight the Financial Strategy Of The Business
When it comes to bank loans, the banks must have faith in your business to pay the loan back. Hence the executive summary must highlight how the business aims to gain investment for the business other than the bank loan, what strategies it is going to implement to increase sales, and forecast the time it will take for the business to reach the break-even point and pay the loan back to the bank.
3. Describe How The Finances Will Be Used
Banks also need to know how you aim to use the investment provided through the bank loan. Hence the executive summary must include details on how the amount provided by the bank will be used by the business such as for buying types of equipment, renting places, for marketing purposes, etc.
The Do’s and Don’ts of Creating a Great Executive Summary
The business plan is an important formal document. There are certain things that one should keep in mind while writing an executive summary. The following are some of the dos and don’ts of writing a great executive summary:
Do’s For Writing A Great Executive Summary
- The executive summary must start with an introduction to what the business is about
- It must highlight features of the products, services or the business that is unique and different from other businesses in the industry
- It must include key highlight points from the entire business plan
- The language and tone used in the executive summary must be formal and engaging
- Tailor the executive summary to the particular reader you are submitting the business plan. For example, the executive summary for a business plan submitted to an investor must highlight the profitability of the business as an investment, while a business plan meant for internal purposes must have an executive summary that is focused on the goals and objectives of the business
- The executive summary must summarise all the key points in the order of the business plan and act as an outline for the content of the other sections
- Have the document be read and reviewed by a third person to ensure that there are no errors and that the document conveys all the relevant information in a logical order
Mistakes To Avoid While Writing A Great Executive Summary
- The words used should not be too technical since all readers may not be familiar with words specific to a type of business or industry
- Do not include a table of content as it distracts the reader from the subject and does not help in keeping them engaged with the material
- Do not include unrealistic information or false claims for the business. Experts who have knowledge about the kind of business the business plan is about can easily recognize such matters and it will only lead to decreasing in the credibility of the business
- Do not use informal language or tone of speech
The executive summary is an integral part of the business plan as it has the potential to draw future investments and also help the business stay on track with its goals.
So, care must be taken to make sure that enough time and effort has been put into writing an executive summary that is attractive to its readers, answers all their doubts, markets the business as a profitable entity, and also shows the reader what the business stands for.
With that said, writing an executive summary is not that hard if you know what exactly to write in it. With some practice and the tips from this guide, you can write the perfect executive summary for your business plan that can attract investors that can help grow your business to the next level!